Department of Commerce, School of Management Sciences Tezpur University

1. FISCAL POLICIES SINCE 2005
PRESENTED BY:
PRAGYA HALOI
UPASA BORAH
AKLANTA MADHAV KALITA

2. MEANING AND DEFINITION
To generate revenue and to incur expenditure, the government frames a policy
called budgetary policy or fiscal policy. So, the fiscal policy is concerned with
government expenditure and government revenue.
A policy under which government uses its expenditure and revenue
program to produce desirable effects and avoid undesirable effects in
the national income, production and employment. - Arthur Smith.

3. Objectives of Fiscal Policy
The following are the objectives of fiscal policy:
1. To maintain and achieve full employment.
2. To stabilise the price level.
3. To stabilise the growth rate of the economy.
4. To maintain equilibrium in the balance of payments.
5. To promote the economic development of underdeveloped
countries.

4. - THE MINISTRY OF FINANCE FORMULATES
FISCAL POLICIES IN INDIA
Tools of Fiscal Policy
•Revenue
•Expenditure
•Debt
•Deficit

6. FISCAL RESPONSIBILITY AND BUDGET MANAGEMENT
ACT 2003(FRBM)
The FRBM act effective from July,2004 mandates the government to
eliminate revenue deficit by March 2009, and reduce fiscal deficit to 3% of
GDP by March 2009. the act provides for greater transparency in operations,
quarterly review for fiscal situations and regulating borrowing from the RBI.
The act made it mandatory for the Finance minister to make an annual
statement to Parliament on the fiscal situation besides explaining any
deviation in meeting the fiscal obligations.

7. HIGHLIGHTS OF 2005-06
•Income upto Rs 1,00,000 per annum exempted from tax
•Fiscal deficit pegged at Rs 1,51,144 crore or 4.3 per cent of GDP
during 2005-06
•Domestic companies to pay 30% corporate income tax and 10%
surcharge
No change in the tax regime for foreign companies
•Customs duty on specified capital goods and all inputs for
manufacture of IT Agreement bound items to be removed
•Plan expenditure is estimated at Rs 1,72,500 crore for 2005-06
Non-plan expenditure at Rs 370.85 crore for next fiscal.

8. HIGHLIGHTS 2006-07
•North Eastern Region (NER): Allocation of Rs. 4,870 crore
under flagship programme in addition to 10% of the plan
budget for each ministry. Total allocation for NER comes to
Rs. 12,041 crore.
•The rates remain same on personal income tax and
corporate income tax. Further, no new taxes have been
imposed.
•Reduction of import duty on all man-made fibres and
yarns, and raw materials like DMT, PTA and MEG to 10%
from 15% .
•Increase in excise duty on cigarettes by 5%.
•Service tax rate increased to 12% from 10%.

9. HIGHLIGHTS OF 2007-08
•Tax free bonds to be issued by state-owned urban local bodies.
•Five year tax holiday for two, three, four star hotels and convention centres with a
seating capacity of 3,000 in NCT of Delhi, Gurgaon, Ghaziabad, Faridabad and Gautam
•Indian investors to be allowed investment in overseas capital markets through mutual
funds. Mutual funds to set up Infrastructure Fund schemes.
•Fiscal deficit for 2007-08 pegged at 3.3 per cent of GDP at Rs.1,50,948 crore. Revenue
deficit at Rs.72,478 crore which will be 1.5 per cent.
•Import duty of 15 specified machinery to be reduced from 7.5 per cent to five per cent.
•Small-scale industries excise duty exemption raised from Rs one crore to Rs 1.5 crore.

10. Highlights of Fiscal Policy 2008-09:
• Saving rate and investment rate estimated to be 35.6 per cent and 36.3 per cent,
respectively, by the end of 2007-08; between April- December 2007-2008. FDI
amounted to US$ 12.7 billion and FII to US$ 18 billion.
• A risk capital fund being created in the Small Industries and Development Bank of India
(SIDBI); Credit Guarantee Trust with SIDBI had extended guarantees to 89,129 units for
an amount of Rs.2,479 crore as on January 31, 2008; SIDBI to reduce the guarantee fee
from 1.5 per cent to 1 per cent and the annual service fee from 0.75 per cent to 0.5 per
cent for loans up to Rs.5 lakhs.
• Relief given to exporters in three tranches amounting to over Rs.8,000 crore; Interest
cost of sterilization through market stabilization bonds (MSS), which is in a sense,
subsidy to the export sector, estimated at Rs.8,351 crore for the year 2007-08.
• Revenue receipts of Central Government for 2008-09 projected at Rs.602, 935 crore and
revenue expenditure at Rs.658,119 crore; Revenue deficit for 2008-09 estimated at
Rs.55,184 crore, which amounts to 1.0 per cent of GDP; Fiscal deficit for 2008-09
estimated at Rs.133,287 crore which is 2.5 per cent of GDP; elimination of Revenue
Deficit may need one more year; because of the conscious shift in expenditure in favour
of health, education and the social sector.
• Threshold limit of exemption from personal income tax in the case of all assesses
increased to Rs.150,000. The slabs and rates of tax are :
Up to Rs.150,000: NIL; Rs.150,001 to Rs.300,000: 10 per cent; Rs.300,001 to
Rs.500,000: 20 per cent ; Rs.500,001 and above: 30 per cent

11. Highlights of Fiscal Policy 2009-10:
• Allocation to National Highways Authority of India (NHAI) for the National
Highway Development Programme (NHDP) increased by 23 per cent over B.E.
2008-09 in B.E. 2009-10 and allocation for Railways increased from Rs.10,800
crore to Rs.15,800 cr.
• Outlays to be stepped up from Rs.2,112 crore in Interim Budget to Rs.3,472
crore in regular Budget 2009-10 for Commonwealth Games to be held ibn
2010.
• Budget Estimates provide for a total expenditure of Rs.10,20,838 crore
consisting of Rs.6,95,689 crore under Non-plan and Rs.3,25,149 crore under
Plan registering an increase of 37 per cent in Non-plan expenditure and 34 per
cent in Plan expenditure over B.E. 2008-09.
• Exemption limit in personal income tax raised by Rs.15,000 from Rs.2.25 lakh
to Rs.2.40 lakh for senior citizens; by Rs.10,000 from Rs.1.80 lakh to Rs.1.90
lakh for women tax payers; and by Rs.10,000 from Rs.1.50 lakh to Rs.1.60
lakh for all other categories of individual taxpayers.
• Customs duty of 5% to be imposed on Set Top Box for television broadcasting.
• Customs duty on LCD Panels for manufacture of LCD televisions to be
reduced from 10% to 5%.

12. Highlights of Fiscal Policy 2010-11:
• Ownership has been broad based in Oil India Limited, NHPC, NTPC and
Rural Electrification Corporation while the process is on for National
Mineral Development Corporation and Satluj Jal Vidyut Nigam. This will
raise about Rs 25,000 crore during the current year.
• Rs.16,500 crore provided to ensure that the Public Sector Banks are able
to attain a minimum 8 per cent Tier-I capital by March 31, 2011.
• Government has introduced the Companies Bill, 2009 in the Parliament to
replace the existing Companies Act, 1956, which will address issues related
to regulation in corporate sector in the context of the changing business
environment.
• The net tax revenue to the Centre as well as the expenditure provisions in
2010-11 have been estimated with reference to the recommendations of the
Thirteenth Finance Commission.
• The total expenditure proposed in the Budget Estimates is Rs. 11,08,749
crore, which is an increase of 8.6 per cent over last year.
• Income tax slabs for individual taxpayers to be as follows:
Income upto Rs 1.6 lakh Nil; Income above Rs 1.6 lakh and upto Rs. 5
lakh 10 per cent; Income above Rs.5 lakh and upto Rs. 8 lakh 20 per cent;
Income above Rs. 8 lakh 30 per cent

13. HIGHLIGHTS OF 2011-12
•Fiscal deficit seen at 5.1 percent of GDP in 2010-11
• Personal income tax exemption limit raised to Rs
180,000 from Rs 160,000 for individual tax payers
•For senior citizens, the qualifying age reduced to 60
years and exemption limit raised to Rs 2.50 lakh.
•Service tax rate kept at 10 percent
•Total expenditure in 2011-12 seen at 12.58 trillion
rupees

14. Highlights of Fiscal Policy 2012-13:
• Rajiv Gandhi Equity Saving Scheme to allow for income tax deduction of
50 per cent to new retail investors, who invest upto Rs.50,000 directly in
equities and whose annual income is below Rs.10 lakh to be introduced.
The scheme will have a lock-in period of 3 years.
• Initiative of Bringing Green Revolution to Eastern India (BGREI) has
resulted in increased production and productivity of paddy. Allocation for
the scheme increased to `1,000 crore in 2012-13 from `400 crore in 2011-
12.
• Gross Tax Receipts estimated at Rs.10,77,612 crore.
• Net Tax to Centre estimated at Rs.7,71,071 crore.
• Non-tax Revenue Receipts estimated at Rs.1,64,614 crore.
• Non-debt Capital Receipts estimated at Rs.41,650 crore.
• Exemption limit for the general category of individual taxpayers proposed
to be enhanced from `1,80,000 to `2,00,000 giving tax relief of `2,000.

15. Highlights of Fiscal Policy 2013-14:
• Allocation of Rs.160 crore to the corpus of Maulana Azad
Education Foundation to raise its corpus to Rs.1,500 crore
during 12th Plan period.
•Credit Guarantee Fund to be created in the Small
Farmers’Agri Business Corporation with an initial corpus of `
100 crore.
• Surcharge of 10 percent on persons (other than companies)
whose taxable income exceed Rs.1 crore to augment revenues.
• Increase surcharge from 5 to 10 percent on domestic
companies whose taxable income exceed Rs.10 crore.
• Out of nearly 17 lakh registered assesses under Service Tax
only 7 lakhs file returns regularly. Need to motivate them to file
returns and pay tax dues. A onetime scheme called ‘Voluntary
Compliance Encouragement Scheme’ proposed to be
introduced. Defaulter may avail of the scheme on condition that
he files truthful declaration of Service Tax dues since 1st
October 2007.

16. Highlights of fiscal policy 2014-15:
• Legislative and administrative changes to sort out pending tax
demands more than 4 lakh crore under dispute and litigation.
• The composite cap of foreign investment to be raised to 49 per cent
with full Indian management and control through the FIPB route.
• PSUs will invest through capital investment a total sum of Rs 2,47,941
crores in the current financial year.
• Total expenditure of Rs.17,94,892 crore estimated.‰‰‰‰Gross Tax receipts
of Rs.13,64,524 crore estimated. Net to centre of Rs.9,77,258 crore
estimated.‰‰
• ‰‰Fiscal deficit of 4.1% of GDP and Revenue deficit of 2.9% estimated.
• Personal Income-tax exemption limit raised by Rs.50,000/- that is, from
Rs.2 lakh to Rs.2.5 lakh in the case of individual taxpayers, below the
age of 60 years. Exemption limit raised from Rs.2.5 lakh to Rs.3 lakh in
the case of senior citizens.

17. HIGHLIGHTS OF 2015
•Fiscal deficit seen at 3.9 per cent of GDP in 2015/16
•To reduce custom duty on 22 items.
•Plans to set up national investment infrastructure fund
•Net market borrowing seen at Rs 4.56 trillion
•To abolish wealth tax

18. CHANGES IN GDP GROWTH
RATE OVER LAST 10 YEARS

19. CHANGES IN FISCAL DEFICIT RATE OVER LAST
10 YEARS

20. Importance of Fiscal Policy
Government activities are enlarged. Tax-
Revenue and Expenditure accounts for large
proportion of GNP.
Government effects the Economic activities
through gap between government receipts
and borrowings.
It indicates the level of overall borrowings by
the government.
It is the indicator of fiscal health of the
economy.